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Peloton Announces Pay Initiatives To Retain Employees, Boost Sales

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Peloton Interactive Inc. (PTON) has declared incentives for its workers with one-time cash bonuses and changes made to its stock compensation plan as it fights to keep employees together and fix its struggling business, according to reports.

These changes come a little more than five months after Barry McCarthy, a former Spotify and Netflix executive, was appointed CEO in early February, taking over from founder John Foley, as the company's expenses went out of control and the demand for its bikes recovered .

At that time of the CEO shakeup, Peloton announced that it would be reducing around $800 million in annual costs. These included cutting 2,800 jobs, or about 20 percent of corporate positions. Now, investors are waiting to see if McCarthy can grow sales and bring in customers as surging inflation tightens budgets and a competitive labor market makes it harder for companies to hold onto employees.

Shari Eaton, Peloton's chief people officer, said in an recent interview that the company is taking the actions so employees can benefit as it works on its turnaround efforts.

"The extraordinary circumstances that we find ourselves in now really give us that chance to pause and look at what it is that we can do to ensure future success," Eaton said.

In one of the internal memos, Peloton told employees that eligible team members will have their post-IPO options repriced to Peloton's closing price on July 1 of $9.13.

The company is also accelerating the vesting requirement by one year for eligible unvested restricted stock units that have more than eight vesting dates left in their vesting schedule. That lets employees access the value of the stock units sooner, Eaton said. The change does not apply to hourly employees or C-suite executives, the company noted.

Not every Peloton employee owns or wants stock in the company. Instead of an equity grant, Peloton's hourly workers in September will be eligible for a one-time cash bonus to be paid before the end of February, according to one of the company internal memos.

Many of the company's hourly employees have said they would prefer to receive cash compensation over longer-term equity grants, Eaton said.

Peloton said people who are employed on an hourly basis as of July 1 will be eligible for the one-time bonus as long as they stay with the company through January 23. The amount of the bonus will vary for people across the business, Eaton said. Any equity awards granted in the past will remain unaffected.

Peloton also told its employees recently that it had finished conducting its first pay equity study with Aon, a third-party consultancy.

The company said it identified less than 4 percent of its workforce, or 206 people, had a base pay disparity relative to peers that could not be explained by factors such as level of work, geography or tenure. Peloton said it took immediate action to eliminate the disparities.

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